Shares of DSW drop as sales decline, profit falls short of expectations

Tuesday

Mar 19, 2013 at 12:01 AMMar 20, 2013 at 7:03 AM

Shares of DSW Inc. fell yesterday after the discount shoe-store chain reported that its fiscal fourth-quarter net income rose 40 percent, but its adjusted results missed expectations and a key sales figure grew at a slower pace.

Shares of DSW Inc. fell yesterday after the discount shoe-store chain reported that its fiscal fourth-quarter net income rose 40 percent, but its adjusted results missed expectations and a key sales figure grew at a slower pace.

The company, which operates 364 shoe and accessory stores in 41 states, also said sales have softened during the first six weeks of fiscal 2013, which began Feb. 3.

Its shares closed down $4.15, or 6.2 percent, at $62.90. Net income for the three months ended Feb. 2 rose to $27.1 million, or 59 cents per share. That compares with $19.4 million, or 37 cents per share, in the prior year.

Results include 10 cents per share in costs related to DSW’s acquisition of Retail Ventures Inc. in May 2011. Retail Ventures’ only operating business was its 62 percent stake in DSW. Columbus-based DSW had been a subsidiary of Retail Ventures, until DSW went public in 2005.

Excluding those costs, adjusted earnings totaled 69 cents per share. That fell short of analyst expectations of 71 cents per share, according to FactSet.

Revenue rose 16 percent to $594.3 million from $513.7 million, boosted by an extra week in the quarter. Analysts expected $600.4 million.

Revenue in stores open at least one year, a key retail metric, rose 3.6 percent, compared with 5.6 percent growth in the prior-year quarter.

The company said sales have softened during the first six weeks of 2013, with revenue in stores open at least one year down 5 percent. The measure is a key metric of a retailer’s financial health because it excludes stores that open or close during the year.

The start represents a “marked difference” from DSW’s usual revenue in stores open at least one year over the past 14 quarters, the company said. So the company said it is difficult to give guidance.

It is assuming revenue in stores open at least one year will be flat in the first half of the year. If the company has flat revenue in stores open at least one year for the whole year, it expects net income of $3.30 to $3.40 per share for the year, excluding one-time costs. Analysts expect $3.83 per share for the year.

For the year ended Feb. 2, net income fell 16 percent to $146.4 million, or $3.23 per share, from $174.8 million, or $4.54 per share, the previous year. Revenue rose nearly 12 percent to $2.26 billion from $2.02 billion a year ago.